Need for government funding drops to R$ 201.5 billion in 2021, says IBGE

The Brazilian government – ​​at the federal, state and municipal levels – registered a borrowing requirement of R$ 201.5 billion in 2021, a decrease of 77.5% compared to 2020. The result is a result of an increase of 25.8 % of total revenue, while total expenditure by the three government spheres increased by 1.8%.

The data are from the Public Finance Statistics and Intermediate Government Account 2021, prepared by the Brazilian Institute of Geography and Statistics (IBGE) in partnership with the National Treasury Secretariat (STN) and the Central Bank of Brazil.

After the shock of 2020 caused by the covid-19 pandemic, which damaged revenue and increased public expenditure on control measures and combating the consequences of the health crisis, there was an improvement in revenue and a milder rise in spending.

In 2021, payments for social security and assistance benefits fell by 15.7% compared to 2020, helping to contain the pace of growth in expenses to an increase of 1.8%. On the collection side, revenue recorded a positive change in all its components: tax revenue (28.2%), social contributions (12.1%) and other revenue (43.9%).

“It was a combination of two factors: a strong increase in revenue, mainly with the recovery of economic activity in the post-pandemic period, and a reduction in expenses, more specifically in the resources used in the previous year to face the pandemic”, justified Douglas Moura Guanabara, manager of Public Administration of the Coordination of National Accounts at IBGE, in an official note.

All tax-related items rose, with emphasis on the performance of taxes on trade and international transactions (up 35.7%, driven by the 38.2% increase in the dollar value of imports), taxes on income, profits and capital gains (32.6%) and taxes on goods and services (27.2%). Property taxes rose 17.8%, while payroll taxes rose 12.7% in 2021.

In income taxes, the result was driven by increases of 71.2% in the collection of the Corporate Income Tax (IRPJ) and 45.4% in the collection of the Social Contribution on Net Profit (CSLL), “explained both by increases in monthly, quarterly and presumed profit collections and by atypical payments, which totaled approximately R$ 40 billion in 2021 ”, noted the IBGE.

“The recovery of economic activity had a direct impact on tax collection, which explains the sharp increase in the collection of taxes on corporate profits, but there are other factors that help explain this performance. The resumption of IOF collection, which had been zeroed for credit operations in 2020, the significant increase in the collection of dividends from federal state companies and financial compensation for oil and gas production provided for in the pre-salt concession contract, are some of them”, added Guanabara, in the note.

Other relevant sources of total income were equity income, which grew 85.3% in the period, due to the 54.5% increase in interest income and the strong increase in dividend collection (384.2%), due to positive financial results of federal state-owned companies, and the collection of concessions of non-produced assets (99.1%), mostly derived from oil royalties, at the federal level, and from privatizations at the state level, with greater emphasis on the auction from Cedae-RJ, observed the IBGE.

As for expenses, despite the reduction in payments of social security and assistance benefits, there was an increase in expenses with remuneration (5.5%), with goods and services (13.7%), with interest (38.7%), with subsidies (6.4%) and with other expenses (37.5%).

“The reduction in spending on social benefits was due to its exceptional increase in 2020, given that this category concentrated a significant part of the resources destined to face the pandemic crisis, with emphasis on emergency aid and the benefit for maintaining employment and income. As a result, the Social Assistance Benefits category of the Intermediate Government Account classification, which recorded a total expenditure of BRL 415 billion in 2020, presented a negative variation of 58.8% in 2021, with a total expenditure of BRL 171 billion”, informed the IBGE.

Gross Fixed Capital Formation (GFCF, which measures investments) went from approximately R$ 112.6 billion in 2020 to 121.2 billion in 2021, a growth of 7.6%, influenced by investments made by state governments (with increase of 73.0%, following the upward trend of 8.6% observed in the previous year).

“Some factors that may help explain the increase in investments at the state level are related to the increase in revenue, such as, for example, the collection of ICMS, an item responsible for approximately 56% of the total state revenue and which presented a variation of 25.8 %, and extraordinary income from concessions and transfers”, explained Guanabara.

Municipal governments (which had boosted the GFCF in the previous two years, with increases of 28.3% in 2019 and 44.3% in 2020) registered a drop of 17.8% in 2021. The federal government reduced by 8.4% investments, after a 3% drop in 2020.

In 2021, the added value of the government was BRL 1.2 trillion, an increase of 7.1% compared to 2020. There was growth in all spheres compared to the performance of 2020: an increase of 3.9% in the federal, 9.7 % in state and 7.5% in municipal. With the most expressive growth in the state and municipal spheres, the federal sphere lost 1.0 percentage point of participation in the total value added to the sector, going from 31.0% in 2020 to 30.0% in 2021, while increasing its participation state (0.8 percentage point) and municipal (0.1 percentage point) governments.

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